Chapter 7

• Chapter 7 is available only if your average monthly income falls below your state's median, or if you can pass a means test that adjusts your income for your expenses. When you file, you disclose your income, assets, expenses and debts to a court trustee. Your assets become part of a bankruptcy estate, which the trustee can sell to pay your creditors. Once you've paid off as much debt as possible, the court will discharge -- wipe out -- the remaining debt, except for child support and similar obligations that survive bankruptcy.
  
  

Exemptions

• Depending on your state's laws, the trustee for your case might be able to empty out your checking account to pay your creditors. The federal government exempts some of your assets, and some states have alternative exemption rules. Exemptions may protect income such as life insurance benefits, pension money and Social Security; if the contents of your checking account come from an exempt source, the trustee can't use the money.
  
  

Timing

• If you have any outstanding debts with your bank, the bank can legally take money out of your account to cover them, up to the amount you had in the account the day you filed. This could leave you without enough money in the account to cover checks or automatic withdrawals that haven't been paid. Bankruptcy attorney Craig Andresen says online that you might be better off opening an account with another bank where you have no debts, then spending the money in your older account before you file.
  
  

After Bankruptcy

• Even if the trustee cleans out your checking account, you may still be able to keep it open. If not, bankruptcy won't usually be an obstacle to opening a fresh account. The only time there could be a problem is if bankruptcy discharged a large number of outstanding checks, or wiped out substantial debt you owed to your bank. Even then, it's unlikely you'll have serious trouble opening an account.